PR and the P&L

April 2014

Understanding how your organization makes and spends money helps you align your public relations goals accordingly, but doing so requires familiarity with your organization’s general finances and with its overall business model. You don’t have to be an accountant or a financial expert to gain understanding about your organization, but you will need to have the right tools and knowledge to help you set and measure goals and benchmarks oriented toward your company’s bottom line.

Obtaining information

Obtaining your organization’s financial information is a straightforward process if your organization is publicly traded. Most publicly traded companies make their financial reports available on their websites.

If you happen to work for a private organization, and/or an organization in which silos are present, obtaining the financial information is going to be more of an undertaking, as you’ll need to gain executive buy-in by demonstrating the impact of public relations on the bottom line. Of course, this is easier to demonstrate if you already know how your company makes and spends money, but it’s still possible.

Start by looking at your own benchmarks and measurable objectives. What has your progress been like? Examine your key metrics and the outcomes of your efforts for patterns that directly apply to company revenue. For example, if customer service calls increased during a specific messaging timeframe, determine the impact on prospects, sales calls, and sales. Study data gathered during PR crises, reputation management campaigns, and quieter messaging times to further establish overall patterns. Be mindful of the impact your efforts have to your organization’s bottom line. Gather your data into a well—organized Excel sheet, set a meeting with the C-suite or your manager, and be ready to detail how well you’re performing, how well you’re leveraging the resources you already have, and the contributions you’re making to the organization. CEOs and CFOs care most about metrics like revenue, margin, and cash flow, so do your best to demonstrate what PR has done to affect those areas and what it could do with access to more financial information.

Making heads and tails of it

PR pros have a lot of savvy in a lot of fields, but if you’re a practitioner without a background in finance or accounting, you may not know exactly what to look at once you obtain some insight into how your company makes and spends money. Of course most importantly, profit = revenue - expenses, but there’s a lot more information to glean than just how to calculate profit. To get the most out of your company’s information, ask to see the statements from the past few years so you can compare year over year.

The SEC has an excellent guide to financial statements, and we’ll share some basics here. Your company’s balance sheet provides information about assets (what a company owns, like products, trademarks, or cash), liabilities (amounts of money the company owes for loans, materials, or employee payroll), and, if the company is publicly traded, shareholders’ equity (the amount of money that would belong to shareholders if the company sold its assets and paid back liabilities).

Income statements (take a look at Google’s for an example) detail how much revenue a company earned in a quarter or over a year and display costs, expenses, earnings per share (if the company is publicly traded) and the bottom line. The income statement starts with total revenue, or all the money the company made during the designated period. From there, you deduct all expenses related to operating cost.

Gross revenue is the total amount of revenue or sales from which no expenses have yet been deducted. Net revenue is the gross revenue minus the returns and allowances, which may stem from discounts or product returns. From net revenue, costs after sales get deducted to arrive at the gross profit or gross margin, from which operating expenses like research, employee payroll, and marketing expenses are deducted. This is different than “cost of sale,” as according to the SEC’s guide, operating expenses can’t be linked directly to the production of products or services being sold.

Once all the operating expenses have been deducted, you’re left with “income from operations,” which is the income before interest and income tax. Once taxes are deducted, you’re finally at the bottom line, which will show a net profit or a net loss, which is the number that tells you how much the organization actually made during the reporting period.

After examining your company’s information, you’ll want to zero in on the metrics that apply to PR campaigns or in which you think PR campaigns can make a difference, and this is where your data comes in. One area with potential is the operating costs; was there a situation in which a better communications element resulted in a lower incidence of customer service calls, as opposed to a period in which customer service calls increased due to lagging communication? If you can correlate messaging with lower customer service calls, better overall messaging may facilitate lowered call center operation costs.

PR data and financial data can also influence sales closed. Perhaps you used the financial information to correlate two separate crises, one which was handled well and correlated in no decrease in customers, and one which could have been more effective and correlated with a decrease in customers. That would indicate that refiningcrisis communication plans and implementing immediate, targeted responses could help prevent sales losses.

Turning numbers into strategies

Understanding how your organization monetizes will not only help you strategize and measure, but it will also help you plan your marketing and public relations budget. Now that you have a deeper understanding of your company and access to some key financial metrics, it’s time to start piecing together your plan, tactics, and measurement based on those metrics.

The first thing to examine is the net profits or losses. If your company turned a net loss or a smaller—than—desired net profit, that’s an indicator that your marketing and PR efforts need to focus on sales by supporting demand generation, deal expansion (selling to an existing client), and sales velocity (closing deals quicker).

On the other hand, if you notice your organization has turned sizeable net profits, it means your message can also expand to branding. However that doesn’t mean you should stop thinking mathematically; if you’re sending out surveys to gauge attitude, preference, or loyalty, you can calculate cost-per-awareness by gathering the percent of uplift in survey scores and dividing campaign cost by percent gain, which gives you the cost of that percent gain in survey results.

And of course no matter what, it’s still crucial in any circumstance to account for ROI, though keep in mind that ROI is a financial figure, so when you’re calculating it, it should be a dollar measure. Here’s a simple formula for calculating ROI: ROI = (Payback - Investment/Investment )*100.

Finally, be sure that you’re measuring the right data, and that in running your quantitative analyses, you aren’t leaving out crucial qualitative metrics that could actually change or reinterpret your analysis.

Of course, metrics will differ between organizations, but now that you have financial information to compare alongside your own measurement, you can begin to reverse engineer your process to focus even more on boosting financials. Use your past data to create data—driven predictions to not only boost sales and link to outcomes, but also to hone your processes and maximize your budget.

Connecting your PR and measurement to the company’s financial statements will still rely on having an effective method for measurement, but working with the financial data allows you to not only optimize your measurement, but also to strengthen your overall strategy and increase your contribution to the success of your company.

About BurrellesLuce

BurrellesLuce is the U.S. leader in media monitoring. Professionals in a wide range of industries rely on our comprehensive curated content from local and national print, online, broadcast, and social media sources. BurrellesLuce has a turnkey copyright compliance program that allows us to provide copyright-compliant, behind-the-paywall content not available to other services. BurrellesLuce combines grade-A content with easy-to-use software, allowing users to evaluate and analyze their media coverage and PR efforts. It's all integrated into our user-friendly interface, BurrellesLuce WorkFlow™.